UPDATE 1-Russia's AvtoVAZ says recalls 100,000 new Lada cars


* Says to recall New Kalina and Granta models

* Identifies defects in the fuel system

* Recall comes after end of production of 'Classic' models (Adds analyst comment, detail, updates shares)

By John Bowker

MOSCOW, April 27 (Reuters) - Russian state car maker AvtoVAZ said on Friday it will recall nearly 100,000 new Ladas due to technical faults, delivering a blow to the firm as it tries to re-brand itself as a reliable modern car manufacturer.

AvtoVAZ, 25 percent owned by France's Renault, said in a statement the recalled vehicles were Kalina and Granta models, two of the company's most recent designs.

The group will recall 70,000 Lada Kalinas, Russia's best-selling car, that were produced between October and March. That amounts to about half of the 143,000 Kalinas sold in the whole of 2011.

Around 24,000 Lada Grantas will also be recalled, just four months after the model was launched.

Granta and Kalina are just two of the new designs the company hopes will eventually replace the three-decade-old Lada Classic, a boxy model that went out of production this month.

The company said at the time that demand for the Classic - a symbol of the backwardness and decline of the Soviet auto industry - had fallen dramatically.

The Kalina, driven 2,000 kilometres across Siberia by Prime Minister Vladimir Putin in a promotional stunt in 2010, overtook the Classic by sales last year after the end of a government-sponsored scrappage scheme that briefly revived the brand.

Russia is on track to become Europe's biggest car market by the middle of the decade as rising incomes and a surge in consumer spending drive consumers toward showrooms.


AvtoVAZ said it had identified possible defects in the fuel system of the recalled cars. It said there had been no complaints from customers, but it had decided to call back the vehicles as a precaution.

Shares in the company were down 0.7 percent at 1304 GMT, having risen 12 percent in the year to date. The firm is majority owned by state groups Russian Technologies and Sberbank .

"It's not really a big surprise that AvtoVAZ is not the highest quality producer, but it's a sign the company is adopting best practices," said VTB autos analyst Vladimir Bespalov.

"It is not uncommon in the car industry to recall vehicles, so it's not something that will be disastrous for AvtoVAZ in terms of sales," he added.

Japanese carmaker Toyota was plunged into crisis by three separate recalls in 2009 and 2010 after reports of unintended acceleration.

Lada sales fell 15 percent year on year during the January to March quarter, as Russian drivers increasingly turned to foreign brands. Sales of the Hyundai Solaris were just 750 below the Kalina over the same period.

Renault paid $1 billion for 25 percent of AvtoVAZ in 2008, but the subsequent financial crisis made the decision look foolhardy as the firm had to be bailed out by the government.

The first Lada-branded Renault model was produced earlier this year, and the French giant is locked in talks with the Russian government about taking full control of the firm. (Editing by Megan Davies and James Jukwey)



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